Blackdog Resources Ltd.
TSX VENTURE : DOG

Blackdog Resources Ltd.

November 30, 2010 08:00 ET

Blackdog Resources Ltd. Announces Q3 2010 Financial Results and Increases Year Over Year Quarterly Revenue by 425%

CALGARY, ALBERTA--(Marketwire - Nov. 30, 2010) - Blackdog Resources Ltd. ("Blackdog" or "the Company") (TSX VENTURE:DOG) is pleased to provide a review of its financial and operating results for the third quarter ended September 30, 2010. The unaudited financial statements and related management's discussion and analysis have been filed with Canadian securities regulatory authorities on SEDAR at www.sedar.com.

Q3 Highlights

  • Increased quarterly revenue to $915,386 (Q3 2009-$174,872) which was an increase of 423%.
  • Increased average daily production to 137 boepd (Q3, 2009-32 boepd) which was an increase of 328%. This production is 98% light oil weighted.
  • Increased quarterly operating netback to $239,959 (Q3, 2009-$89,669) which was an increase of 160%.
  • Increased funds flow from operations to $104,833 (Q3, 2009-$11,450) which was an increase of 816%

The third quarter of 2010 was a period of unparalleled growth for the Company since its inception. The Company posted record revenue of $915,386 (Q3, 2009-$174,872). This was an increase of 423% from Q3, 2009. Daily production increased to an average of 137 boepd (Q3, 2009- 32 boepd) with a 98% weighting to light oil. This reflected a 328% daily increase in production. Funds flow from operations increased to $104,833 (Q3, 2009-$11,450) which reflected an 816% increase. The Company managed this growth while maintaining tight general and administrative costs of $135,126 for the quarter (Q3, 2009-$78,219) which was only 73% higher than in Q3, 2009. Included in these numbers are royalty costs of $237,945 for the quarter (Q3, 2009- $14,990). This is an increase of 1487% from Q3, 2009. These figures do not take into account the approximate net $60,000 rebate for the quarter that the Company expects to receive from the Government of Alberta under the Drilling Royalty Credit program. During the quarter, the Company was also forced to shut in wells on several occasions because of extremely wet weather, which negatively impacted the Company's revenue, daily production and cash flow from operations for the quarter. 

The Company focused on 3 distinct areas during the quarter. The first of these was to integrate a new producing property into the Company's domain of assets. In July 2010, the Company acquired interests in 3 light oil wells in Girouxville, Alberta (the "Acquisition") for $710,000 cash and 100,000 Blackdog common shares. These wells produce on average between 75-80 bbls/d of light oil net to the Company and have provided a boost to the Company's cash flow and production rates. While these wells have high royalty rates associated with them, they still yield excellent monthly net operating income. The monthly royalties on these wells in Q3 2010 averaged over $65,000. Subsequent to closing the Acquisition, the Company entered into an agreement with another Alberta-based oil and gas company in November 2010 to acquire $800,000 Drilling Royalty Credits which are part of the revised Alberta Royalty Incentive Drilling Program, which will allow the Company to receive a net deduction of 25% of the royalties on the majority of its Alberta wells, including the Girouxville wells, until March 31, 2012, retroactive to April 1, 2010. Blackdog incurred no capital costs to acquire these credits. The Acquisition also included a seismically defined potential high impact Granite Wash drilling target on the lands. The Company has a 55% working interest in this prospect.

The Company's second focus for the quarter was at its core area at Woking, Alberta, approximately 80 km northeast of Grande Prairie. During the quarter, the Company continued its dual focus of evaluating and understanding the technical intricacies of the Halfway oil zone and continued our focus to lower our ongoing operating costs for our four producing oil wells and the Enhanced Oil Recovery/Salt Water Disposal System (EOR/SWD). Progress in both areas of focus has been excellent. Because of exceptionally wet weather at Woking during the quarter, the Company would not have been able to move rig equipment onto the lease without causing long term damage to roads and infrastructure. Therefore, the Company took the time to engage veteran and experienced consultants to provide the Company with additional expertise and direction on its development strategy. Subsequent to the quarter and under colder weather conditions, the Company has commenced its winter work-over strategy. A rig arrived on site on November 25, 2010 and the Company intends to re-complete two wells with two very different strategies over the next couple of weeks. Based on the results of these two work-overs, the Company may re-enter several more wells during the winter of 2010-2011. In terms of cost control, the Company has installed chemical pumps on all of its wells and intends to install fire tube heating tanks on all of its tanks by year end. The combination of these two capital purchases has allowed the Company to now break over 95% of the water out of the oil emulsion it produces. This allows for less emulsion to be trucked off the lease, resulting in lower trucking and processing costs and better use of the EOR/SWD. Also, subsequent to quarter end, the Company renegotiated its trucking contracts and has lowered its trucking costs by approximately 50%. The Company intends to further drop its operating costs at Woking in 2011 when the Company expects to have a power line and transformer (the latter to be installed in January 2011 at no cost to the Company) installed at its EOR/SWD location to eliminate its rental generator and other rented equipment. During the quarter, the Company produced oil from 4 wells at Woking. Monthly production increased throughout the quarter and with the actions the Company has taken to reduce operating costs, the Company is pleased with its progress at Woking and the cash flow the property is generating. The Company has not deviated from its initial projections at Woking and still intends to bring on 12-15 wells at Woking over time.

The third area of focus during the Quarter was to understand the current value of the Company's other assets and decide how to maximize the value of these assets. The Company's land at Evi, Alberta is in the middle of one of the most active light oil resource plays in the province of Alberta and the Company has the rights to both the Granite Wash and the Slave Point on its land. The most active formation is the Slave Point, where several companies are drilling lucrative horizontal wells that are relatively inexpensive to drill and have strong initial production rates and steady long term production profiles. These low risk wells benefit from the new Alberta Royalty Rate of 5% for the first year of production and have excellent roads and pipeline infrastructure available. Also, very recently, the Company has reviewed public information from other companies drilling in Evi, which have drilled very good Granite Wash wells that have swabbed at rates between 300-400 bbls/d. The Company has received several cash offers for its land and has decided it will conduct its own technical analysis and pending technical merit, possibly drill its own Slave Point horizontal wells in 2011. The Company already believes it has a seismically defined vertical Granite Wash target at Evi.

At Pembina, the Company has an average 15% working interest in 5 sections of land and has watched with great interest the Cardium Light Oil Resource play where horizontal Cardium wells have been drilled in and around its various landholdings over the last 18 months. Horizontal Cardium wells are very expensive and some wells have produced much better than others, so having the benefit of monitoring and evaluating other industry operations in this play has provided the Company with important information regarding the most effective multi stage fracture stimulation techniques on these wells, which have been improving quarter by quarter. The Company has been verbally advised by one of its partners that they had planned to drill a Cardium horizontal well on our own joint lands at the end of Q3 or in early Q4, 2010. This well has now been delayed until Q1, 2011. The Company believes drilling later rather than sooner is in the best interests of the Company and therefore is pleased with that decision. 

In addition, during Q3, 2010, the Company renegotiated its credit facility with its bank. The Company's operating line has been increased from $800,000 to $2,000,000 with its interest rate reduced by 0.5%. During Q2, 2010, the Company fulfilled all its 2009 Flow Through Expenditure commitments.

About Blackdog

Blackdog is a junior oil and gas company focused on light oil development in Alberta and South East Saskatchewan. Blackdog currently has 21,268,267 shares outstanding.

Certain information regarding Blackdog in this news release, including management's assessment of future plans and operations and expected results from operations, may constitute forward looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, production, marketing and transportation, loss of markets, volatility of commodity prices, imprecision of reserve estimates, environmental risks, competition from other producers, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Although Blackdog believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Blackdog can give no assurance that they will prove to be correct. Additional information on these and other factors that could affect Blackdog's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements or information contained in this news release are made as of the date hereof and Blackdog does not undertake any obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

The term "barrels of oil equivalent" or "boe" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Neither the TSX Venture Exchange nor its Regulator Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or the accuracy of this release.

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